Question 1

The more firms an oligopoly has,

Accepted Answer

A)  the more market power the oligopoly has. This results in higher prices and lower quantities of output than an oligopoly with fewer firms would have. 
B)  the more important the price effect is, resulting in the market price being higher than when there are fewer firms in the oligopoly. 
C)  the farther market price will be from marginal cost. 
D)  the more likely the firms will charge a price closer to the perfectly competitive price. 
A)  the more market power the oligopoly has. This results in higher prices and lower quantities of output than an oligopoly with fewer firms would have. 
B)  the more important the price effect is, resulting in the market price being higher than when there are fewer firms in the oligopoly. 
C)  the farther market price will be from marginal cost. 
D)  the more likely the firms will charge a price closer to the perfectly competitive price.

Question 2

The prisoners' dilemma game

Accepted Answer

A)  provides insight into why cooperation is individually rational. 
B)  provides insight into why cooperation is difficult. 
C)  is a game in which neither player has a dominant strategy. 
D)  is a game in which exactly one of the two players has a dominant strategy. 
A)  provides insight into why cooperation is individually rational. 
B)  provides insight into why cooperation is difficult. 
C)  is a game in which neither player has a dominant strategy. 
D)  is a game in which exactly one of the two players has a dominant strategy.

Question 3

Table 17-6. The table shows the demand schedule for a particular product.
  
-Refer to Table 17-6.Suppose the market for this product is served by two firms that have formed a cartel.If the marginal cost of production is $0 and there is no fixed cost,the combined profit of the cartel will be

Accepted Answer

A)  $16 
B)  $24 
C)  $30 
D)  $32 
A)  $16 
B)  $24 
C)  $30 
D)  $32

Question 4

In order to be successful,a cartel must

Accepted Answer

A)  find a way to encourage members to produce more than they would otherwise produce. 
B)  agree on the total level of production for the cartel, but they need not agree on the amount produced by each member. 
C)  agree on the total level of production and on the amount produced by each member. 
D)  agree on the prices charged by each member, but they need not agree on amounts produced. 
A)  find a way to encourage members to produce more than they would otherwise produce. 
B)  agree on the total level of production for the cartel, but they need not agree on the amount produced by each member. 
C)  agree on the total level of production and on the amount produced by each member. 
D)  agree on the prices charged by each member, but they need not agree on amounts produced.

Question 5

Table 17-21
The Chicken Game is named for a contest in which drivers test their courage by driving straight at each other. John and Paul have a common interest to avoid crashing into each other, but they also have a personal, competing interest to not turn first to demonstrate their courage to those observing the contest. The payoff table for this situation is provided below. The payoffs are shown as (John, Paul).
  
-Refer to Table 17-21.What is John's dominant strategy?

Accepted Answer

A)  John has no dominant strategy. 
B)  John should always choose Turn. 
C)  John should always choose Drive Straight. 
D)  John has two dominant strategies. 
A)  John has no dominant strategy. 
B)  John should always choose Turn. 
C)  John should always choose Drive Straight. 
D)  John has two dominant strategies.

Question 6

In the prisoners' dilemma game with Bonnie and Clyde as the players,the likely outcome is one

Accepted Answer

A)  in which neither Bonnie nor Clyde confesses. 
B)  in which both Bonnie and Clyde confess. 
C)  that involves neither Bonnie nor Clyde pursuing a dominant strategy. 
D)  that is ideal in terms of Bonnie's self-interest and in terms of Clyde's self-interest. 
A)  in which neither Bonnie nor Clyde confesses. 
B)  in which both Bonnie and Clyde confess. 
C)  that involves neither Bonnie nor Clyde pursuing a dominant strategy. 
D)  that is ideal in terms of Bonnie's self-interest and in terms of Clyde's self-interest.

Question 7

Scenario 17-4. Consider two cigarette companies, PM Inc. and Brown Inc. If neither company advertises, the two companies split the market and earn $50 million each. If they both advertise, they again split the market, but profits are lower by $10 million since each company must bear the cost of advertising. Yet if one company advertises while the other does not, the one that advertises attracts customers from the other. In this case, the company that advertises earns $60 million while the company that does not advertise earns only $30 million.
-Refer to Scenario 17-4.In 1971,Congress passed a law that banned cigarette advertising on television.If cigarette companies are profit maximizers,it is likely that

Accepted Answer

A)  neither company opposed the ban on advertising. 
B)  Brown Inc. sued the federal government on grounds that the ban constitutes a civil rights violation. 
C)  both companies sued the federal government on grounds that the ban constitutes a civil rights violation. 
D)  both companies retaliated with black-market operations. 
A)  neither company opposed the ban on advertising. 
B)  Brown Inc. sued the federal government on grounds that the ban constitutes a civil rights violation. 
C)  both companies sued the federal government on grounds that the ban constitutes a civil rights violation. 
D)  both companies retaliated with black-market operations.

Question 8

Table 17-12
Each year the United States considers renewal of Most Favored Nation (MFN) trading status with Farland (a mythical nation). Historically, legislators have made threats of not renewing MFN status because of human rights abuses in Farland. The non-renewal of MFN trading status is likely to involve some retaliatory measures by Farland. The payoff table below shows the potential economic gains associated with a game in which Farland may impose trade sanctions against U.S. firms and the United States may not renew MFN status with Farland. The table contains the dollar value of all trade-flow benefits to the United States and Farland.
  
-Refer to Table 17-12.Pursuing its own best interests,Farland will impose trade sanctions against U.S.firms

Accepted Answer

A)  only if the U.S. does not renew MFN status with Farland. 
B)  only if the U.S. renews MFN status with Farland. 
C)  regardless of whether the U.S. renews MFN status with Farland. 
D)  None of the above is correct. In pursuing its own best interests, Farland will in no case impose trade sanctions against U.S. firms. 
A)  only if the U.S. does not renew MFN status with Farland. 
B)  only if the U.S. renews MFN status with Farland. 
C)  regardless of whether the U.S. renews MFN status with Farland. 
D)  None of the above is correct. In pursuing its own best interests, Farland will in no case impose trade sanctions against U.S. firms.

Question 9

Assume that Peach Computers has entered into a resale price maintenance agreement with Computer Super Stores Inc.(CSS Inc.)but not with CompuMart.In this case,

Accepted Answer

A)  the wholesale price of Peach computers will be different for CSS Inc. than it is for CompuMart. 
B)  Peach computers will never increase profits by having a resale price maintenance agreement with all retail outlets that sell its products. 
C)  CompuMart might benefit from customers who go to CSS Inc. for information about different computers. 
D)  CSS Inc. will sell Peach computers at a lower price than CompuMart. 
A)  the wholesale price of Peach computers will be different for CSS Inc. than it is for CompuMart. 
B)  Peach computers will never increase profits by having a resale price maintenance agreement with all retail outlets that sell its products. 
C)  CompuMart might benefit from customers who go to CSS Inc. for information about different computers. 
D)  CSS Inc. will sell Peach computers at a lower price than CompuMart.

Question 10

Game theory is important for the understanding of

Accepted Answer

A)  competitive markets. 
B)  monopolies. 
C)  oligopolies. 
D)  all market structures. 
A)  competitive markets. 
B)  monopolies. 
C)  oligopolies. 
D)  all market structures.

Question 11

Table 17-25
There are just two producers of a certain product. Each is considering offering promotional discounts.
  
-Refer to Table 17-25.At the Nash equilibrium,how much profit will Firm A earn?

Accepted Answer

A)  $120,000 
B)  $90,000 
C)  $80,000 
D)  $70,000 
A)  $120,000 
B)  $90,000 
C)  $80,000 
D)  $70,000

Question 12

A situation in which firms choose their best strategy given the strategies chosen by the other firms in the market is called

Accepted Answer

A)  a competitive equilibrium. 
B)  an open-market solution. 
C)  a socially-optimal solution. 
D)  a Nash equilibrium. 
A)  a competitive equilibrium. 
B)  an open-market solution. 
C)  a socially-optimal solution. 
D)  a Nash equilibrium.

Question 13

A dominant strategy is a strategy that is best for a player in a game regardless of the strategies chosen by the other players.

Accepted Answer

A) True 
 B)False

Question 14

Consider a game of the "Jack and Jill" type in which a market is a duopoly and each firm decides to produce either a "high" quantity of output or a "low" quantity of output.If the two firms successfully reach and maintain the cooperative outcome of the game,then

Accepted Answer

A)  both the combined profit of the firms and total surplus are maximized. 
B)  the combined profit of the firms is maximized but total surplus is not maximized. 
C)  the combined profit of the firms is not maximized but total surplus is maximized. 
D)  neither the combined profit of the firms nor total surplus is maximized. 
A)  both the combined profit of the firms and total surplus are maximized. 
B)  the combined profit of the firms is maximized but total surplus is not maximized. 
C)  the combined profit of the firms is not maximized but total surplus is maximized. 
D)  neither the combined profit of the firms nor total surplus is maximized.

Question 15

As a group,oligopolists earn the highest profit when they

Accepted Answer

A)  achieve a Nash equilibrium. 
B)  produce a total quantity of output that falls short of the Nash-equilibrium total quantity. 
C)  produce a total quantity of output that exceeds the Nash-equilibrium total quantity. 
D)  charge a price that falls short of the Nash-equilibrium price. 
A)  achieve a Nash equilibrium. 
B)  produce a total quantity of output that falls short of the Nash-equilibrium total quantity. 
C)  produce a total quantity of output that exceeds the Nash-equilibrium total quantity. 
D)  charge a price that falls short of the Nash-equilibrium price.

Question 16

What happens when the prisoners' dilemma game is repeated numerous times in an oligopoly market?
(i)The firms may well reach the monopoly outcome.
(ii)The firms may well reach the competitive outcome.
(iii)Buyers of the oligopolists' product will likely be worse off as a result.

Accepted Answer

A)  (i) and (ii) 
B)  (ii) and (iii) 
C)  (i) and (iii) 
D)  (i), (ii), and (iii) 
A)  (i) and (ii) 
B)  (ii) and (iii) 
C)  (i) and (iii) 
D)  (i), (ii), and (iii)

Question 17

As the number of firms in an oligopoly increases,the magnitude of the price effect increases.

Accepted Answer

A) True 
 B)False

Question 18

Table 17-20
Nadia and Maddie are two college roommates who both prefer a clean common space in their dorm room, but neither enjoys cleaning. The roommates must each make a decision to either clean or not clean the dorm room's common space. The payoff table for this situation is provided below, where the higher a player's payoff number, the better off that player is. The payoffs in each cell are shown as (payoff for Nadia, payoff for Maddie).
  
-Refer to Table 17-20.If Maddie chooses to clean,then Nadia will

Accepted Answer

A)  clean and Maddie's payoff will be 30. 
B)  not clean and Maddie's payoff will be 7. 
C)  clean and Maddie's payoff will be 50. 
D)  not clean and Maddie's payoff will be 10. 
A)  clean and Maddie's payoff will be 30. 
B)  not clean and Maddie's payoff will be 7. 
C)  clean and Maddie's payoff will be 50. 
D)  not clean and Maddie's payoff will be 10.

Question 19

Table 17-15
This table shows a game played between two players, A and B. The payoffs in the table are shown as (Payoff to A, Payoff to B).
  
-Refer to Table 17-15.If player B chooses Right,player A should choose

Accepted Answer

A)  Up and earn a payoff of 1. 
B)  Middle and earn a payoff of 5. 
C)  Middle and earn a payoff of 7. 
D)  Down and earn a payoff of 4. 
A)  Up and earn a payoff of 1. 
B)  Middle and earn a payoff of 5. 
C)  Middle and earn a payoff of 7. 
D)  Down and earn a payoff of 4.

Question 20

Figure 17-4. Two companies, Acme and Bilco, are sellers in the same market. Each company decides whether to charge a high price or a low price. In the figure, the dollar amounts are payoffs and they represent annual profits for the two companies.
  
-Refer to Figure 17-4.If this game is played only once,then the most likely outcome is that

Accepted Answer

A)  both firms charge a low price. 
B)  Acme charges a low price and Bilco charges a high price. 
C)  Acme charges a high price and Bilco charges a low price. 
D)  both firms charge a high price. 
A)  both firms charge a low price. 
B)  Acme charges a low price and Bilco charges a high price. 
C)  Acme charges a high price and Bilco charges a low price. 
D)  both firms charge a high price.

The more firms an oligopoly has,

The prisoners' dilemma game

Table 17-6. The table shows the demand schedule for a particular product. -Refer to Table 17-6.Suppose the market for this product is served by two firms that have formed a cartel.If the marginal cost of production is $0 and there is no fixed cost,the combined profit of the cartel will be

In order to be successful,a cartel must

In the prisoners' dilemma game with Bonnie and Clyde as the players,the likely outcome is one

Assume that Peach Computers has entered into a resale price maintenance agreement with Computer Super Stores Inc.(CSS Inc.)but not with CompuMart.In this case,

Game theory is important for the understanding of

Table 17-25 There are just two producers of a certain product. Each is considering offering promotional discounts. -Refer to Table 17-25.At the Nash equilibrium,how much profit will Firm A earn?

A situation in which firms choose their best strategy given the strategies chosen by the other firms in the market is called

A dominant strategy is a strategy that is best for a player in a game regardless of the strategies chosen by the other players.

Consider a game of the "Jack and Jill" type in which a market is a duopoly and each firm decides to produce either a "high" quantity of output or a "low" quantity of output.If the two firms successfully reach and maintain the cooperative outcome of the game,then

As a group,oligopolists earn the highest profit when they

What happens when the prisoners' dilemma game is repeated numerous times in an oligopoly market? (i)The firms may well reach the monopoly outcome. (ii)The firms may well reach the competitive outcome. (iii)Buyers of the oligopolists' product will likely be worse off as a result.

As the number of firms in an oligopoly increases,the magnitude of the price effect increases.

Table 17-15 This table shows a game played between two players, A and B. The payoffs in the table are shown as (Payoff to A, Payoff to B). -Refer to Table 17-15.If player B chooses Right,player A should choose

Ten Principles of Economics.

Thinking Like an Economist.

Interdependence and the Gains from Trade.

The Market Forces of Supply and Demand.

Elasticity and Its Application

Supply, Demand, And Government Policies.

Consumers, Producers, and the Efficiency of Markets.

Application: The Costs of Taxation.

Application: International Trade.

Externalities.

Public Goods and Common Resources.

The Design of the Tax System.

The Costs of Production.

Firms in Competitive Markets.

Monopoly.

Monopolistic Competition.

The Market For the Factors of Production.

Earnings and Discrimination.

Income Inequality and Poverty.

The Theory of Consumer Choice.

Frontiers in Microeconomics.

Filters

Exam 17: Oligopoly.

The more firms an oligopoly has,

The prisoners' dilemma game

Table 17-6. The table shows the demand schedule for a particular product. -Refer to Table 17-6.Suppose the market for this product is served by two firms that have formed a cartel.If the marginal cost of production is $0 and there is no fixed cost,the combined profit of the cartel will be

In order to be successful,a cartel must

In the prisoners' dilemma game with Bonnie and Clyde as the players,the likely outcome is one

Assume that Peach Computers has entered into a resale price maintenance agreement with Computer Super Stores Inc.(CSS Inc.)but not with CompuMart.In this case,

Game theory is important for the understanding of

Table 17-25 There are just two producers of a certain product. Each is considering offering promotional discounts. -Refer to Table 17-25.At the Nash equilibrium,how much profit will Firm A earn?

A situation in which firms choose their best strategy given the strategies chosen by the other firms in the market is called

A dominant strategy is a strategy that is best for a player in a game regardless of the strategies chosen by the other players.

Consider a game of the "Jack and Jill" type in which a market is a duopoly and each firm decides to produce either a "high" quantity of output or a "low" quantity of output.If the two firms successfully reach and maintain the cooperative outcome of the game,then

As a group,oligopolists earn the highest profit when they

What happens when the prisoners' dilemma game is repeated numerous times in an oligopoly market? (i)The firms may well reach the monopoly outcome. (ii)The firms may well reach the competitive outcome. (iii)Buyers of the oligopolists' product will likely be worse off as a result.

As the number of firms in an oligopoly increases,the magnitude of the price effect increases.

Table 17-15 This table shows a game played between two players, A and B. The payoffs in the table are shown as (Payoff to A, Payoff to B). -Refer to Table 17-15.If player B chooses Right,player A should choose

Ten Principles of Economics.

Thinking Like an Economist.

Interdependence and the Gains from Trade.

The Market Forces of Supply and Demand.

Elasticity and Its Application

Supply, Demand, And Government Policies.

Consumers, Producers, and the Efficiency of Markets.

Application: The Costs of Taxation.

Application: International Trade.

Externalities.

Public Goods and Common Resources.

The Design of the Tax System.

The Costs of Production.

Firms in Competitive Markets.

Monopoly.

Monopolistic Competition.

The Market For the Factors of Production.

Earnings and Discrimination.

Income Inequality and Poverty.

The Theory of Consumer Choice.

Frontiers in Microeconomics.

Filters